Saturday, October 9, 2010

Suppose a friend asked you to move. You'd might grumble, but you might also show up to help. If they offered you $20 for your trouble, it becomes easier to just say 'no.'

My point: Money alone is not what makes us do something- like our jobs. Salary increases and bonuses do not equate to better performance, or engagement.

In one study, University students were divided into groups and got a financial reward for correct responses on a GMAT test. Groups that perceived the reward as too little, did twice as poorly as those who were NOT paid. The money actually served as a disincentive. On the flip side, there are loads of examples showing higher incentives leading to worse performance. For more on this, check out Dan Pink's fantastic (and animated) talk at the RSA: Surprising truth about what motivates us.

Compensation is obviously a complex topic. And sometimes money is an important part of the equation - for example, if there isn't enough to live on or when peers are making loads more. But, throwing more money at employees doesn't lead to increased performance.

Instead, you need to invest in creating a self-directed and purpose-filled work environment. Employees need a sense of autonomy, they need to be given the opportunity to improve themselves (challenging assignments, learning & training opportunities, etc...), and they need purpose (working towards something they believe in, understanding a mission, strong sense of team).

Are you as willing to invest in communicating your mission and goals as you are in salary increases? Do you have a culture that empowers employees to be effective on their own? How do you motivate your team? How do you drive productivity?